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No. 360

July 2010

Vol. XIC

ISSN 0019-5170


Profit Inefficiency of Commercial Banks in India During Post Reform Period

Siva Reddy Kalluru* And Sham Bhat K.

This study examines the profit inefficiency of commercial banks in India by employing stochastic profit frontier approach for the period 1995-2007. The empirical results of the study, in general, reveal that profit inefficiency of Indian commercial banks decreased during the study period. Public sector banks are relatively more inefficient among the three groups and their inefficiency has declined rapidly. Private and foreign group banks performed relatively well during the period. Results on the inefficiency effects model reveal that the rate of inflation and the concentration are positively associated while branches are negatively related with profit inefficiency of banks India. Besides, the study also evidenced ownership performance relationship in Indian banking.

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Determinants of Agricultural Credit Constraint-A Micro Level Analysis

P. Ambiga Devi and S. Gandhimathit

In India, commercial banks, co-operative and Regional Rural banks were the main conduit for providing agriculture credit. Though the total agricultural credit of institutional agencies had increased from Rs.885 crore in 1970-1971 to Rs.1,25,309 crore in 2004-2005, till the year 2003-2004, the private sector and public sector commercial banks did not achieve the target lending (18 percent net, bank credit) to the agricultural sector fixed by the Reserve Bank of India. Around 60 percent of the working capital of the farmers was not financed by the financial institutions and remained as institutional credit gap. The above facts brought out the presence of institutional credit gap in the agricultural sector lending and substantiated for disequilibrium credit market condition in agriculture (National Accounts Statistics, 2006).

The studies in India on the extent of credit constraint and the impact of agricultural credit on agricultural sector in a disequilibrium market condition a very limited (Kochar, 1997). Hence the major objective of the present study is to analyse the extent of credit constraint and the factors determining credit constraint.

To conclude, in the study area, the area under cultivation (except in Karamadai block) and farmers' own fund to invest, turned out to be the significant factors to determine probability of credit constraint. The co-efficient of farmers' own fund had consistent negative sign. It revealed that the probability of credit constraint had declined with increase in the amount of farmers' own fund to invest.

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Agricultural Exports of India : An Analysis of Growth and Instability

R.K Kaundal and Manoj Sharma

This paper is an attempt to examine the agricultural exports of India during the period 1991-92 to 2006-07. The paper concludes that the levels of India's exports of principal groups and principal agricultural products have shown variations in exports. The annual compound growth rates for primary products and the manufactured products were less than total export growth. In terms of export earnings of principal agricultural exports, commodities with fairly decent growth rate and low instability include wheat, tobacco, oil meals, fruits and vegetables, sugar and molasses and meat and meat preparations. The prospect of future growth in the export of agricultural commodities lies in the commodities with high growth and low instability.

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The Study of Trade-Poverty Nexus in Pakistan : Under Investigation of Pro-poor Trade Index (PPTI)

Khalid Zaman, Mehboob Ahmadi and Waseem Ikram

Pakistan's trade suffers seriously due to various structural issues which need to be addressed. Effective and sound trade policy plays an important role in alleviating poverty nation-wide. Pro-Poor Trade Index (PPTI) deals with the dynamic aspect of trade-poverty-inequality. The aim of this study is to investigate the potential impact of trade policy on the poor in Pakistan. Data is analyzed from 1985-2006. This research is extended within the phenomen of Pro-poor Trade Index (PPTI) as proposed by Kakwani and Pernia (2000). Results reveal that during the last two decades, three phases are regarded as Pro-poor. First phase is from 1985-86, second phase is from 1990-91 and the third phase is from 1997-99. While remaining period is pro-rich or anti-poor. Cumulative effect of two decades is Pro-poor nation-wide at rural level, whereas it is anti-poor at urban level. -This analysis helps decision makers in developing strategies and policies for enhancing trade thereby alleviating poverty.

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Business Approach, Size and Technical Efficiency of Scheduled Commercial Banks in India--A Non-parametric Study

Amarjeet Singh and Tushinder Preet Kaur

The present study endeavors to examine the levels of relative efficiency in the commercial banks by using two different approaches namely operation approach and intermediation approach. The former reflects way of evaluating the efficiency of commercial bank from the perspective of costs/revenue management and latter approach takes commercial bank as financial intermediary between those who has excess demand for funds and who has excess supply of funds. To pursue the objectives linear programming based data envelopment analysis technique has been utilized. The study reports an average overall technical inefficiency to the tune of 10.16 percent via operation approach and 15 percent via intermediation approach. This study shows that Indian commercial banks are more efficient in operational approach than in intermediation approach. The basic reason behind the lower efficiency of SCBs via intermediation approach is accumulation of non-performing assets. While, on the opposite side, the difference between lending and deposits interest rates is also important reason for high efficiency of SCBs via operation approach. In terms of size, large banks are more efficient than medium and small banks via operation approach and small banks are more efficient than medium and large banks via intermediation approach. The search for the sources of this amount of inefficiency ends up with the finding that improper management (i.e., PTIE) is a dominant source and selection of inappropriate scale of production (i.e., SIE) is relatively meager source responsible for overall technical inefficiency (i.e., OTIE)

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Estimating Import Demand Function of Bangladesh : A Time Series Analysis

Khan Md. Azizur Rahman, Md. Zabid Iqbal and Asma UII Husna

The paper has investigated the behavior of Bangladesh's imports during the period 1973-2003 using the Johansen and Juselies (JJ) co-integration technique both at aggregate and disaggregates level. The study explores that import volume arc co-integrated with RGDP, relative import price, consumption expenditure, investment expenditure and exports. In the long run, in aggregate model, imports are income elastic and price inelastic, but estimated error correction model arc not valid. In disaggregated model, exports and relative import prices are major determinants of movements in imports in the long run and we get a valid error correction model. In the short run, consumption expenditure, exports and relative import prices are inelastic and significant. On the whole, as implied in the estimation results, it can he concluded that the disaggregate model is more appropriate to explain the import demand of Bangladesh.

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India's Coffee Exports in Scenario of WTO: An Analysis of Trend and Structural Shift

Maniklal Adhikaryt and Shrabanti Maity

Faced with stiff competition from major coffee growing countries like Brazil and Vietnam. Indian coffee is loosing out significantly in the global export market. The situation on the domestic front is no better. Although in the last few years the consumption of coffee has grown significantly. The annual coffee consumption has grown from 60,000 tones six years ago to 80,000tones today, modern coffee chains account for almost 6,000 - 7,000 tones annually, which is almost 10 percent of the total consumption and domestic consumption has remained at 78% and 22% , respectively for a long time now. India's coffee growers suffered from government's restrictive attitude until economic reforms introduced in 199). India's membership of W'10 agreement also helps to increase the amount of exports of coffee. W'I'O agreement overriding importance of today's regional trade agreements and broad sectoral issues are influencing the behavioural patterns and equations of international trade. We divide our entire period of study into two regimes, Regime - I( 1987- 88 to 1994 - 95) and Regime - 2 (1995-96 to 2005 - 06) captures the effect of export of coffee in pre and past WTO phase. In the paper authors make an attempt to provide a detailed analysis of the trend in India's external trade in coffee.

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Supplier Inducement in Automobile Insurance: The case of Taiwan Automobile Insurance Market

Lin-yhi Chou, Yiing Luen Sim and Yu-Chieh Tang

Auto repairpersons have too roles: to act as the consumer's advisor and to offer automobile maintenance. If repairpersons are financed on a costs-for-item basis, a competitive market would provide an incentive to exploit the information advantage. Owing to increases in repairpersons' income, they may decrease repair costs in areas where there is higher density of repair shops and higher incentive demand quantity. The incentive demand can increase in four ways: (1) by increasing the number of recall visits; (2) by increasing than cost of maintenance test; (3) by increasing the number of maintenance visit each one week, and (4) by increasing the price of parts and materials. The purpose of this paper is to elucidate the Taiwan auto mobile insurance market effect on supplier-induced demand (SID) in the auto repair market. The data were obtained from 651 questionnaires returned from repair shop customers. OLS and logistic regression were used to test the coefficient relationship between repairpersons' character variables and repair expense or probability of insured event.

Repairpersons reduced the charge in the face of a competitive environment, which may decrease the loss severity of vehicle insurance in urban markets. Hence, this paper successfully supports the supplier-induced demand on automobile insurance market. This SID case will decrease probability of insured event in cities. Lower density of repairperson has suggested that driver repaired or maintained vehicle at the last month of insurance policy. Then, driver has occurred in insured even, who usually received repairperson’s suggested that they should repaired or maintained their vehicle at the last month of insurance policy. This result implies that automobile insurance company should notice cases of claim from lower density or repair shop.

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Growth and Instability in Global Trade of Peas

Usha Tuteja

Pulses are the main source of protein for masses in the Asian countries. These are also valuable for the crop systems due to their nitrogen fixing capacity. Pulse crops are cultivated in large number of countries covering around 69 million hectares with a production of almost 60 million tonnes. Area under these leguminous crops remained almost stagnant between 1985 and 2005, but production grew at the slow rate of 0.48% per annum due to positive growth of yield, 0.50% per annum during this period.

Peas originated in Europe and Western Asia are grown throughout the world as a cool season crop. In India, this crop is cultivated on 0.73 million ha with annual production of 0.72 million tonnes. It is mainly grown in Uttar Pradesh. Haryana, Punjab, Rajasthan, Jammu and Kashmir and parts of adjoining states. It is a high-yielding pulse crop. Unripe pods are used as green vegetable and dry seeds are used for dal purpose. Other parts are used as feeding cattle.

The specific objective of this paper has been to analyse growth and instability in peas trade at the global level and in major trading countries between 1985 and 2005. Therefore. it examines changes in imports, exports and their instability based on secondary data collected from FAQ web site.

Main findings of this paper reveal that Netherlands Followed by France & Mexico were the three largest exporters of green peas with Acting a growth rate of 7.34% per year during the study period. The growth of value was even higher than this rate. Guatemala, China and Germany indicated higher growth in comparison to other exporting countries. The imports of green peas at the global level out performed exports and growth was around 10% per annum with significant coefficient. Spain, Malaysia, Italy and Germany registered more than 10% growth during this period.

The uncertainty level in world peas trade calculated by log variance method suggests that it was 22.4% and 17.9% for green and dry peas exports in quantity terms. These figures for imports of green and dry peas were found 20.4% and 17.9 % respectively. The country level indices vary significantly. Germany indicated relatively higher instability in green peas exports as well as imports. For dry peas, Germany in exports and Pakistan in imports experienced higher volatility.

The likely implications of global peas trade of India depend on two factors future growth in domestic production and increase in consumption. India never exported peas but it was one of the leading importer of dry peas in 2005. Gradually, India’s share in world imports rose significantly between 1985-2005. Its suggests that high instability in the leading exporting countries (Canada and Germany) would effect India in terms of prices as well as availability. In these circumstances best strategy for the country would be to increase domestic production of peas by adopting available improved technology with out losing time.

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Extent and Intensity of Poverty and Inequality West Bengal vs. All Major States of India

Bimal Kumar Bera

The study is an attempt to measure the proportion of people living below poverty line along with there intensity and inequality in distribution of income among poor in all major states of India. It reveals that in the post liberalization period, poverty has come down from 38.8 to 18.7 and from 38.8 to 21.8 percent in rural and urban areas of India respectively that is resultant effect of poverty reduction in states with varying magnitude. The intensity of poverty which measures the deepening of poverty shows that depth of poverty is higher in so called economically advanced states in comparison to some underdeveloped states like Bihar, Orissa, Uttar Pradesh, Madhya Pradesh and West Bengal. The inequality in the distribution of income among poor in states like Gujarat, Punjab, Haryana, Maharastra, Tamil Nadu etc. are clearly visible when compared with not so advance states of eastern region, Uttar Pradesh and Madhya Pradesh where income distribution was more equitable, but over the entire study period, in all these states inequality has widen. The percentage share of state total income by bottom and top 10 percent of the respective state poor population shows a reduction in inequality in income in rural areas and in urban areas, this gap remains more or less same and this share by bottom 10 percent of population living in urban areas has worsen overtime and they are living in absolute poverty.

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Performance of Indian Silk Goods Exports: A Constant Market Share Analysis

P. Kumaresan, S. Indumati and C. K. Kamble

The competitiveness of India's silk goods exports to the major silk consuming markets was compared with that of China to analyze the determinants of' export growth. The constant market share model was employed to decompose the total changes in the market shares of India's and China's exports of' silk goods into three sources namely, import growth effect, market effect and competitive effect for two distinct time periods namely. 1995 to 2000 and 2001 to 2005. The competitiveness of' China's silk exports improved significantly in the period between 2001 and 2005 to improve their market share in different countries. Though the competitiveness improved for Indian silk goods during 2001 to 2005 compared to 1995 to 2000, it was not enough to have positive effect on the changes in market share.

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